Local government finance settlement: short-term needs met with 2.4% boost

The annual local government finance settlement shows that the government has recognised short-term pressures facing local government — but it is yet to solve medium to long-term financial demands burdening authorities around the UK, according to county council chiefs.

The settlement, announced today by communities secretary James Brokenshire, includes an increase of core spending power for councils from £45.1bn in 2018-19 to £46.4bn in 2019-20; a cash-increase of 2.8%.

In other spending news, Brokenshire noted that the Rural Services Delivery Grant will be given a minor increase of £16m in 2019-20; as well as £20m to maintain the New Homes Bonus baseline at 0.4% in 2019-20.

Other significant announcements include the government’s plans to increase business rates retention to 75% from 2020, with an additional 15 new pilots to test the new approach in 2019-20 in major counties including Lancashire, North of Tyne, and Somerset.

“Under the current scheme, councils estimate that they will receive around £2.4bn in business rates growth in 2018-19. It’s therefore no wonder that councils are queuing up to get involved in the pilots we’ve been running to test the new approach,” Brokenshire told MPs.

Amongst other announcements from the communities secretary, the government will use some of the increased growth in business rates income to distribute £180m of levy surplus to councils based on need.

The response to the long-awaited settlement has been mixed: council chiefs are positive about the short-term demands of their residents being met, however the government may have done little in addressing the long-term issues facing every local authority today.

Chairman of the County Councils Network and leader of Kent County Council Cllr Paul Carter said the finance settlement comes at a “hugely challenging time” for councils.

He explained: “For the first time in many years, this settlement confirms that the government has recognised short-term pressures facing local government.

“Whilst today’s settlement contains vital short-term support, it does not solve medium-term financial pressures, so tough decisions will still need to be taken and our members will have little choice but to raise council tax to meet demand-led pressures in services.”

No end in sight to austerity

From the capital’s perspective, Cllr Peter John, chair of London Councils, said that the budget settlement is a reminder that austerity is not over for local government.

“The simple truth is that it is more expensive to run services in areas with high deprivation, with high salary and building costs, and where the population is growing rapidly. The new formula for allocating funds should reflect that.”

Liverpool City Region Mayor Steve Rotheram weighed in with his opinion on the settlement, arguing that austerity “remains alive and kicking”:

Today's local government finance settlement in a nutshell: austerity remains alive and kicking, while council budgets are left on life support. #LGFShttps://t.co/dtcKys7Jtk

Chairman of the LGA Lord Porter said: “The recent Budget showed the government is listening to the LGA’s call for desperately-needed investment in our under-pressure local services, such as roads and social care.

“Next year will continue to be hugely challenging for all councils, who still face an overall funding gap of £3.2bn in 2019-20. It is therefore disappointing that the government has not used the settlement to provide further desperately-needed resources for councils next year.

“It is vital that the government uses the final settlement next month to provide the further resources needed to protect our local services in 2019-20 before ensuring next year’s Spending Review delivers a truly sustainable funding settlement for local government.”

Andrew Gwynne, shadow communities and local government secretary, said the announcement means only two things for households: “an inflation-busting increase in council tax, and no end in sight for austerity.”

Gwynne noted that Conservative cuts have hit poorest areas the hardest since 2010, with councils losing 60p out of every £1 since eight years ago.